Compounding Center’s Assets Frozen After Fungal Meningitis Outbreak

January 30, 2013 – This week, a federal judge ruled that assets of the company at the center of last year’s unprecedented fungal meningitis outbreak will be frozen indefinitely. An emergency injunction was placed on the New England Compounding Center (NECC) after the owners were accused of funneling more than $21 million out of the company’s assets before filing for bankruptcy in December. Last year’s meningitis outbreak, which was linked to tainted steroid pain injections processed by NECC, resulted in more than 700 illnesses and 45 confirmed deaths.

Compounding Pharmacy Recall Update 8/12/13: Texas-based compounding pharmacy Specialty Compounding, LLC, has issued a nationwide recall for all lots of medications it has processed since May 9. To date, at least 15 people have been diagnosed with a rare bacterial infection after being administered injections of calcium gluconate at a pair of Texas hospitals. In response to this and a number of other recent compounding pharmacy recalls, the FDA is asking Congress for increased oversight and authority over these operations.

What’s the problem?

On Monday, U.S. Bankruptcy Judge Henry J. Boroff placed an emergency injunction on NECC’s assets, effectively preventing the company’s owners from selling their homes or from spending $21 million in salary and shareholders distributions they received last year. The injunction also prevents three affiliated companies from paying money to NECC’s owners.

Last year’s fungal meningitis outbreak was first reported on in September, when a Tennessee man was diagnosed with a rare form of the disease whose source could not be traced. Eventually, the man’s doctors found evidence of fungal infection with a mold known as Aspergillus Fumigatus. A subsequent investigation linked the illness and several others to methylprednisolone acetate, a widely-prescribed injectable steroid painkiller that was processed at NECC’s plant in Framingham, Mass.

The company has been accused of distributing the tainted steroid medications, as well as playing the role of a stealth drug manufacturer. Under federal law, compounding pharmacies are supposed to make small lots of custom medications on a per-patient basis for local hospitals, but NECC was found to have distributed over 17,000 contaminated vials of methylprednisolone acetate nationwide. The company also allegedly employed sales representatives to pitch its products to hospitals and pain clinics around the country.

NECC is currently facing a growing number of lawsuits filed on behalf of survivors of the meningitis outbreak and relatives of those who died as a result of their illness. The company is also facing numerous state and federal investigations into its activities leading up to the outbreak.

On January 31, a panel of judges will hear oral arguments on whether all fungal meningitis lawsuits filed on the federal level should be consolidated for pretrial handling as part of a multidistrict litigation (MDL). NECC has voiced its support for consolidation, stating that it expects hundreds of lawsuits to be filed against it in courthouses around the country in the coming weeks and months. MDLs are designed to reduce duplicative discovery, avoid conflicting rulings by different judges, and to speed things though the litigation process as quickly as possible.